LIFT & SHIFT INDIA P.LTD,MUMBAI vs. ASST CIT CEN CIR 7(1), MUMBAI

This appeal in A.Y.2011-12 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-58/2017-18 dated 20/08/2018 (ld. CIT(A) in short) in the matter of imposition of penalty u/s.271(1)(c).

The only issue involved in this appeal is as to whether the ld. CIT(A) was justified in upholding the levy of penalty u/s.271(1)(c) of the Act in the facts and circumstances of the case.

We have heard rival submissions. We find that assessee is engaged in the business of heavy transportation for which it had imported equipments by availing buyers credit facility from bank. The exchange rate difference between the date of import and the actual date of payment resulted in loss and the same was claimed by the assessee as revenue expenditure on a bonafide belief by placing reliance on the decision of the Hon’ble Supreme Court in the case of Indian Cements Ltd. vs. CIT reported in 60 ITR 52 (SC) wherein it was held that the purpose for which the funds have been utilised is not relevant. The entire factual matrix of assessee availing buyers credit facility from bank for importing equipments together with the workings for exchange rate difference thereon were duly placed on record before the lower authorities. During the course of proceedings, the assessee understood that since the exchange rate difference arose on account of import of equipments which were capital in nature and accordingly, agreed to the contention of the ld. AO that the exchange loss thereon should also add to the cost of depreciable asset. Accordingly, no appeal was preferred by the assessee